How Much Should You Contribute to Your 401k?

1 Answer

Answer :

If you have been researching retirement planning advice recently, you know that many experts believe the cornerstone of planning for retirement is to invest in a 401k retirement account. Many adults have access to a 401k account through their employer's benefits package. However, independent 401k accounts are also available through some banks and financial institutions. While most retirement planning experts agree that you should be contributing regularly to your 401k account, a common question involves how much you should be contributing on a regular basis.Employer-Matching ProgramMany employers that offer a 401k plan also have an employer-matching program in place. The matching benefit varies from employer to employer. Some employers may match your own contributions dollar for dollar up to 3 percent of your income. Others may match half of your contributions up to 2 percent of your income. Regardless of the structure of the matching program, it is in your benefit to fully take advantage of this program. Employer contributions essentially provide you with free money that can grow over time and be used for retirement purposes.Should You Contribute More?While many people do faithfully contribute money towards their 401k plan, a common concern is if they are contributing enough money or too much. These are funds that can only be withdrawn without penalty after you reach the age of 59 _. What if you want or need access to money before you reach this age but have saved the bulk of your money in your 401k plan? The key to a successful retirement is to plan for your goals. This involves defining what your goals are. Saving regularly is great, but you should define your goals in order to determine if you are on track for enjoying the retirement you want. While funding your 401k plan is important, diversifying your assets is also important. Consider your options for diversifying with a Roth IRA, real estate investments, CDs and more in combination with your 401k in order to fund your retirement plans. Keep in mind that there is not a magic number that every individual will want saved in his or her 401k account. Instead, there is a balance that should be reached that is unique for each individual based on specific retirement goals.

Related questions

Description : What is the maximum contribution I can contribute to a 401k?

Last Answer : The maximum amount that you can contribute to your 401K plan is 50% of your taxible wages. If your Employer has a "match" Program They Will Contribute a Mirrior 50% with yours

Description : How much have you lost in your 401k?

Last Answer : I have nearly 20 years before I can take anything out so I’m not even looking at it. It would hurt to much. Now would be a great time to be putting money in though, especially if you were strictly dollar cost averaging and not panicking.

Description : how much state tax is withheld from 401k at age 62?

Last Answer : To be safe right around 8 percent

Description : How much of a penalty is there for the rollover of a 401k?

Last Answer : Most companies will allow you to leave your 401k plan with them as long as the balance is over five thousand. If the balance is lower than that they will most likely return it to you as a check ... a huge amount of taxes to the IRS. So consider all options before making the leap to switch companies.

Description : How much does it cost to transfer a 401k to an IRA?

Last Answer : It depends on the situation. Sometimes it will cost you nothing to switch it over. Other times, the company will charge you a small fee to do it.

Description : Wanting to take money out of 401k, does there need to be a reason?

Last Answer : answer:TL;DR - It depends, but probably. Rules vary a ton between plans. They're always going to ask and there are some good, helpful, reasons for them to. There are also a few steps to ... best first step is probably to give them a call and just ask questions until you know all your options.

Description : Although I'm no longer employed, I have a 401K account through a former employer. Is there a way for me to continue contributing to that 401K account?

Last Answer : I am not a financial wizard or anything, but I’m pretty sure you can not continue contributing to that account. Have you looked into rolling it over into an IRA and then you can add your contributions to that IRA.

Description : Would it be wise to use your 401K to pay off your house?

Last Answer : Depends on the interest rate of your mortgage and if you'll incur a penalty for early withdrawal, but generally speaking, no. With regard to the early withdrawal penalty, the magic number is 59 and ½. Let' ... could earn more than 5% if you invest it. But as I say, YMMV, depending on your situation.

Description : Is this a smart idea, to take a loan out of my 401k for?

Last Answer : answer:I think you should start a side fund, if you can, to save money for your venture, rather than to touch your 401K. I was in a financial pinch a while back for about the same amount of money and ... s something that can wait a month or two for you to pull together the money, I'd wait and save.

Description : How can I find out whether I have a 401k from an old job?

Last Answer : There will be someone at the company designated as the 401K administrator, probably in Human Resources or Payroll. Call and ask who that is and speak to that person.

Description : How is your 401K doing?

Last Answer : This past year—it’s value increased between 5 and 6%.

Description : Where can I find any information on guaranteed retirement account proposals and claims of confiscation of 401k funds?

Last Answer : answer:I hadn't even heard the term until you mentioned it. It's all news to me. I did a google search for Guaranteed Retirement Account and found the same links you can find doing that search. So I ... right-wingnuts. I don't know yet, but it's something else to know about'. Thanks for the Q.

Description : Why are businesses rarely offered precious metal mutual funds by their 401k management company?

Last Answer : Even in mutual fund market, precious metals are very high risk and may burn even very savvy fund managers

Description : How is your 401K doing?

Last Answer : This past year—it’s value increased between 5 and 6%.

Description : Can you lose money in your 401K?

Last Answer : Yes you can. If you’re invested in something, and it loses money, you lose money.

Description : What happens if I cash out my 401k?

Last Answer : It’s a bad idea…but YEP we’ve had to do it. I’m not sure what your tax bracket is however, you can withhold the taxes when you cash out. Make certain you do that or you’ll have to come up with cash at tax time in April.

Description : Can you recommend some things I should think about and/or investment opportunities I should consider (e.g. 401k, Roth IRA, etc) and how to decide where to start?

Last Answer : The most important thing is just to start!

Description : Where did my 401K go?

Last Answer : Didn’t you keep any of your annual statements? Did you roll it into your next employer’s plan?

Description : What's your 401K looking like this quarter?

Last Answer : Like I wish I’d had followed my own instincts and moved the $$ after I lost the first $10K… But it’s getting better. I just wish I still had what I started out with in April of last year.

Description : I have a good amount of money invested into my 401k as a 26 year old. I'm thinking about just cashing it out and taking the loss of half the money i invested. Which kills me to think about this. But I'm afread ... it out? Or wait? I'm thinking I could loss more if I just left it in... Am I right?

Last Answer : Don't do it. A 401K is an investment that is meant to grow over time. Sometimes you lose sometimes you gain, but short of an economic disaster you will gain if you leave it alone. The tax you will ... pay on the money you withdraw will be yet another loss on top of the future gains you will losing.

Description : How do I track down a 401k from a previous job?

Last Answer : Contact the accounting department for your ex-company.

Description : I have credit card debt, and a 401k account from my last job that equals that debt, what are my options here?

Last Answer : Are you sure about the $2k? I believe you lose more than that because you are looking at taxes + penalties for early withdrawal. I would try to negotiate with the credit cards to get a lower interest rate. Also, if you have any room, try to do a balance transfer (watch out for the transfer fee).

Description : What are you doing with your 401k?

Last Answer : answer:Buy low. Sell high. So buy, buy, buy. This too shall pass. :)

Description : SHOULD I REDUCE 401K DEDUCTION TO PAY CREDIT CARD DEBIT?

Last Answer : If your tax savings and 401K investment return combined are higher than your credit card debt interest, then no.

Description : I Need My 401k Money Now should I Borrow from 401(k)?

Last Answer : Borrowing from 401k is a good and also a bad idea. If you borrow from 401k, you will get deeper in debt. Imagine, you work hard and you are get taxed by the government to fund the 401k, ... . Borrowing money is not the solution to your Financial Problem. Always solve your problem, don't escape it.

Description : All About Your 401k?

Last Answer : A 401k is a retirement plan that is used exclusively in theUnited States. An employee elects to have a portion of his or herwages diverted in a savings account, or a 401k. Some companiesoffer ... are tax deferrable, any money that you should choose toput aside will be deducted from your yearly ear

Description : Why Should You Complete A 401K Rollover?

Last Answer : There are multiple benefits to saving via a 401K plan. First,you get tax deferral with a regular 401K plan. The amountcontributed to your 401K reduces your current year federal andstate taxes. ... this problem is to perform a 401Krollover. While there are multiple options for a 401K rollover,

Description : 401k ira?

Last Answer : One of the most important aspects of having good financialresponsibility is properly preparing for retirement. To prepare forretirement you will need to set up long term investment goals,maintain your investments ... the other hand, an IRA is madewith post tax contributions. While this may sound

Description : Is there any penalty with a 401K rollover to IRA?

Last Answer : You can avoid penalties doing a rollover, but you have to follow directions completely. There are deadlines that have to be met when requesting the procedure.

Description : Are there any circumstances where I can take an early withdrawal without penalty from a 401K retirement plan?

Last Answer : There are a number of restrictions and requirements regarding early withdrawals from a 401K. Additionally, the IRS regulations often change. Your best bet is to discuss your situation with your fund manager or consult with your tax professional.

Description : Is a 401K the same as an IRA?

Last Answer : A 401k and a IRA are different. A 401k is a employer sponsored plan while a IRA is not.

Description : How would I open a 401k account?

Last Answer : A 401k is a employer sponsored retirement plan for small and large companies. You can visit sites like Fidelity.com to apply for a 401k account.

Description : Is a 401k account really a good investment?

Last Answer : That depends. If you are not a good saver and traditionally spend your money quickly, a 401K is a good investment to make sure you have money when you retire.

Description : How do I open a 401k?

Last Answer : Go to an investment broker (many banks have these) and open the account. You'll need to decide how much of your paycheck you want to put into the 401k. Note that there is a ... a company sponsored 401k available. Many times your employer will match your contributions up to a certain percentage.

Description : Under what circumstances can you withdraw from a 401K without a penalty?

Last Answer : If you cannot get money from any other source and you need money for something like staving off foreclosure (financial hardship), you can withdraw money with no penalty. Taxes would be need to be paid and you can only withdraw the exact amount you need.

Description : What will happen if I decide to withdraw money out of my 401K account before I reach retirement age?

Last Answer : You will get nailed with at least a 10% penalty and have to claim it as taxable income besides, unless you can do it on a 401k loan wich you repay to yourself at a set interest rate. (a much better idea)

Description : How do I request 401k information?

Last Answer : According to the United States Department of Labor, there are many things that you may need to check about your 401k from your employer. To get a hold of your personal 401k, you will need to get ... get more information on your personal 401k, such as several options you can do to contribute to it.

Description : What is the difference between a 401k plan and an IRA?

Last Answer : They are basically the same thing but have different names. The only other difference is will be the deductibility of the 401K compared to the IRA.

Description : Which websites have the best information for people who need to rollover a 401k?

Last Answer : When looking for great advice and resources on you 401k rollover check out www.securewealthplanning.com/. With expert advice, you'll get the information you need.

Description : Does a 401K or Roth IRA provide greater tax efficiency?

Last Answer : A 401k and a IRA are different. A 401k is a employer sponsored plan while a IRA is not. A Roth grows tax free, while a 401k is taxed when you withdrawl the funds.

Description : Is your company required to give you information on how your 401k is invested?

Last Answer : The company are required to provide this information. If it is a larger company they usually send a booklet to all of the 401K employees which mentions where the money is going.

Description : What are the tax consequences of a 401k rollover from my old job?

Last Answer : A 401k rollover is an option that comes with very few tax consequences. If you setup the rollover incorrectly you could face tax liability that is unexpected.

Description : How do cash balance plans differ from a 401k plan?

Last Answer : A 401k plan invest your money for you. A cash balance may earn a small amount of interest but has no risk.

Description : What steps do I need to take in order to get my empoloyees 401k benefits It's a small private business.?

Last Answer : Ask at the finacial department for the paperwork on it.

Description : What should I know before starting a 401k with my local bank?

Last Answer : 401K policies are fairly standard, so bank-specific policies are less of an issue. The main thing that differs is what types of investments your specific plan will use. Be sure to ask about this.

Description : How can I cash in my 401K plan?

Last Answer : You can cash in your 401K plan upon retirement or after a penalty before your retirement age.

Description : What should I know before investing in a 401K?

Last Answer : The biggest question is how much to invest, typically you should be able to match your salary in 10 years. You should also have a understanding of mutual stocks that you can use your 401k to ... of investing with your 401k http://moneyandsuch.blogspot.com/2007/09/how-to-invest-your-401k-funds.html

Description : What is the best way to roll over a 401k account?

Last Answer : To avoid any penalties you should roll your 401k into an IRA account.

Description : Who can enroll into a 401K plan?

Last Answer : A legalized us citizen can enroll into a 401k plan

Description : What should I know before I get a 401K?

Last Answer : What happens if you leave the company is one find here here http://www.smartmoney.com/personal-finance/retirement/5-things-you-should-know-about-your-401k-7925/